IMF says recovery in Caribbean has lost momentum

WASHINGTON, CMC – The International Monetary Fund (IMF) says its “Regional Economic Outlook for the Western Hemisphere” has marked down its growth forecasts for Latin America and the Caribbean to 1.2 percent in 2018 and 2.2 percent in 2019, from the May 2018 forecasts of 2.0 percent and 2.8 percent, respectively.

“The moderating recovery is underpinned by divergent growth outcomes across the region,” the Washington-based financial institution said on Wednesday.

In some of the region’s largest economies, it said the recovery has slowed sharply “as country-specific characteristics amplify the impact of growing trade tensions and tightening monetary conditions.”

“Moreover, higher global oil prices coupled with increased political uncertainty have dampened the near-term outlook in several economies in Central America,” the IMF said.

But, it said there are bright spots to the outlook.

It said better terms-of-trade over the past year and improvements in consumer and business confidence have boosted the growth prospects in some Andean economies (such as Colombia, Chile, and Peru), adding that “activity is recovering in the Caribbean, reflecting the uptick in tourism owing to robust US growth.”

“Despite the slowdown in regional economic activity, private investment is showing signs of life,” Alejandro Werner, Director of the IMF’s Western Hemisphere Department, told a press conference in Bali, Indonesia.

Having contracted for three years in a row, Werner said private investment in Latin America and the Caribbean is estimated to have "stopped being a major drag to growth in 2017 and is gaining further strength.”

In the last quarter of 2017 and the first quarter of 2018, the contribution of investment to growth in the region turned positive and is projected to continue supporting the recovery this year and next, the IMF said.

Nevertheless, it said investment levels are expected to remain below the levels observed in other regions, “which would be explained in part by low saving rates.”

In this regard, the IMF said prospects for long-term growth in the region remain modest at 2.8 percent.

It, however, said economic prospects for the Caribbean are improving.

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